FHA Reverse Mortgages

FHA Reverse Mortgages (HECMs) for Consumers

The Home Equity Conversion Mortgage (HECM) is FHA's reverse mortgage program which enables you to withdraw some of the equity in your home. You choose how you want to withdraw your funds, whether in a fixed monthly amount or a line of credit or a combination of both. You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing. HECM counselors will discuss program eligibility requirements, financial implications and alternatives to obtaining a HECM. They will also discuss provisions for the mortgage becoming due and payable. Upon the completion of HECM counseling, you should be able to make an independent, informed decision of whether this product will meet your needs. You can search online for a HECM counselor. You can use a reverse mortgage calculator to help you see if you qualify. If you meet the eligibility criteria, you can complete a reverse mortgage application by contacting a FHA-approved lender. Borrower Requirements You must: Be 62 years of age or older Own the property outright or have a small mortgage balance Occupy the property as your principal residence Not be delinquent on any federal debt Participate in a consumer information session given by an approved HECM counselor Mortgage Amount Based On Age of the youngest borrower Current interest rate Lesser of appraised value or the HECM FHA mortgage limit Financial Requirements No income or credit qualifications are required of the borrower No repayment as long as the property is your principal residence Closing costs may be financed in the mortgage Property Requirements The following eligible property types must meet all FHA property standards and flood requirements: Single family home or 1-4 unit home with one unit occupied by the borrower HUD-approved condominium Manufactured home that meets FHA requirements How the Program Works If you are a homeowner age 62 or older and have paid off your mortgage or have only a small mortgage balance remaining, and are currently living in the home, you are eligible to participate in FHA's reverse mortgage program. The program allows you to borrow against the equity in your home. You can select from five payment plans: Tenure - equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence. Term - equal monthly payments for a fixed period of months selected. Line of Credit - unscheduled payments or in installments, at times and in an amount of your choosing until the line of credit is exhausted. Modified Tenure - combination of line of credit plus scheduled monthly payments for as long as you remain in the home. Modified Term - combination of line of credit plus monthly payments for a fixed period of months selected by the borrower. You can change your payment options for a fee of $20. Unlike ordinary home equity loans, a FHA reverse mortgage HECM does not require repayment as long as the home is your principal residence. Lenders recover their principal, plus interest, when the home is sold. The remaining value of the home goes to you or your heirs. You can never owe more than your home's value. If the sales proceeds are insufficient to pay the amount owed, FHA will pay the lender the amount of the shortfall. FHA collects an insurance premium from all borrowers to provide this coverage. The amount you can borrow depends on your age, the current interest rate, other loan fees, and the appraised value of your home or FHA's HECM mortgage limit for your area, whichever is less. Generally, the more valuable your home is, the older you are, and the lower the interest, the more you can borrow. If there is more than one owner, the age of the youngest owner is used to determine the amount you can borrow. For an estimate of HECM cash benefits based on your age, home value, and current interest rate, go to the online calculator. There are no asset or income limitations in order for you to be eligible for a HECM. In addition, there is no limit on the value of homes qualifying for a HECM. The value of your home will be determined by an appraisal. However, the amount that you may borrow is derived from the lower of the appraised value or the FHA HECM mortgage limit of $625,500. You are charged an upfront insurance premium of 2 percent of the maximum claim amount that may be borrowed plus a 0.5 percent annual premium. HECM Costs You can pay for most of the costs of a HECM by financing them and having them paid from the proceeds of the loan. Financing the costs means that you do not have to pay for them out of your pocket. On the other hand, financing the costs reduces the net loan amount available to you. The HECM loan includes several fees, including an origination fee, closing costs, mortgage insurance premium, interest and servicing fees. Origination Fee You will pay an origination fee to compensate the lender for processing your HECM loan. A lender can charge a HECM origination fee up to $2,500 if your home is valued at less than $125,000. If your home is valued at more than $125,000 lenders can charge 2% of the first $200,000 of your home's value plus 1% of the amount over $200,000. HECM origination fees are capped at $6,000. Closing Costs Closing costs from third parties can include an appraisal, title search and insurance, surveys, inspections, recording fees, mortgage taxes, credit checks and other fees. Mortgage Insurance Premium (MIP) You will incur a cost for HECM insurance. You can finance the mortgage insurance premium (MIP) as part of your loan. You will be charged an upfront MIP at closing which will be 2% of the lesser of your home's value or the FHA HECM mortgage limit for your area. You will also be charged a monthly MIP that equals 0.5% of the mortgage balance. The HECM insurance guarantees that you will receive expected loan advances and that you will not have to repay the loan for as long as you live in your home. The insurance also guarantees that, if you or your heirs sell your home to repay the loan, your total debt can never be greater than the value of your home. Servicing Fee Lenders or their agents provide servicing throughout the life of the HECM. Servicing includes sending you account statements, disbursing loan proceeds and making certain that you keep up with loan requirements such as paying taxes and insurance. HECM lenders may charge a monthly servicing fee of no more than $30 if the loan has an annually adjusting interest rate and $35 if the interest rate adjusts monthly. At loan origination, HECM lenders set aside the servicing fee and deduct the fee from your available funds. Each month the monthly servicing fee is added to your loan balance. Interest Rate HECM borrowers can choose an adjustable interest rate or a fixed rate. If you choose an adjustable interest rate, you may choose to have the interest rate adjust monthly or annually. Lenders may not adjust annually adjusted HECMs by more than 2 percentage points per year and not by more than 5 total percentage points over the life of the loan. FHA does not require interest rate caps on monthly adjusted HECMs. Repaying a HECM A HECM loan must be repaid in full when you die or sell the home. The loan also becomes due and payable if: You do not pay property taxes or hazard insurance or violate other obligations. You permanently move to a new principal residence. You, or the last borrower, fail to live in the home for 12 months in a row. An example of this situation would be if you (or the last borrower) were to have a 12-month or longer stay in a nursing home. You allow the property to deteriorate and do not make necessary repairs. HECM homepage

Port Charlotte, Sarasota, North Port, Punta Gorda, Owner Financing

Port Charlotte, Sarasota, North Port, Punta Gorda, Owner Financing

Owner Financing in Port Charlotte, Sarasota, North Port, Punta Gorda

(aka "Seller Financing")

You might be thinking, "Hey, could I just make payments directly to the seller instead of getting a mortgage? Then I wouldn't have to qualify for the mortgage." That indeed could be a good deal, except that owner-financed deals like this are rare. Here's why.

The seller has to pay off their existing mortgage before they can sell there home in Port Charlotte, Sarasota, North Port, Punta Gorda.

Let's say the seller is selling the house for $150,000 house in Port Charlotte, Sarasota, North Port, Punta Gorda, and they've got $110,000 left on the mortgage. If they sell it the regular way, where you get your own loan from a bank, then $110,000 of the your new mortgage will pay off the seller's old mortgage, and the seller will wind up with $40,000 in cash.

But if the seller wants to owner-finance his Port Charlotte, Sarasota, North Port, Punta Gorda to you, then s/he'll have to pay off the existing mortgage first. Does the seller have a spare $110,000 lying around? Probably not. So in most cases, sellers can't owner-finance to you even if they wanted to, because they don't have the means to pay off their existing mortgage.

The seller in Port Charlotte, Sarasota, North Port, Punta Gorda wants all their cash up front.

With a regular sale, the seller gets all the cash up front. When they owner-finance, the money trickles in, month by month, for 30 years. So most sellers prefer a regular sale so they can get all their money up front. After all, what's the most common reason people sell a house? So they can buy another one. And they'll likely need the money from the sale of the old house to use as a down payment on the new house, or to fix it up, or both.

Another reason the seller might not want to owner-finance is that they don't expect to live another 30 years in order to collect all the payments. This is especially true if the seller is over 40.

So you see, sellers usually either can't seller-finance, or they don't want to. That's why you'll rarely find houses that are owner-financed.

Of course there are exceptions. Here are cases when owner-financing is a possibility.

Read More Here

First-Time Homebuyer Credit Questions.

First-Time Homebuyer Credit Questions and Answers: Basic Information

Q. What is the credit? A. The first-time homebuyer credit is a new tax credit included in the recently enacted Housing and Economic Recovery Act of 2008. For homes purchased in 2008, the credit operates like an interest-free loan because it must be repaid over a 15-year period. The credit was expanded in 2009 for homes purchased in 2009, increasing the amount of the credit and eliminating the requirement to repay the credit, unless the home ceases to be your principal residence within the 36-month period beginning on the purchase date. Q. How much is the credit? A. The credit is 10 percent of the purchase price of the home, with a maximum available credit of $7,500 ($8,000 if you purchased your home in 2009) for either a single taxpayer or a married couple filing a joint return, but only half of that amount for married persons filing separate returns. The full credit is available for homes costing $75,000 or more ($80,000 if purchased after Dec. 31, 2008, and before Dec. 1, 2009). Q. Which home purchases qualify for the first-time homebuyer credit? A. Any home purchased as the taxpayer’s principal residence and located in the United States qualifies. You must buy the home after April 8, 2008, and before Dec. 1, 2009, to qualify for the credit. For a home that you construct, the purchase date is considered to be the first date you occupy the home. Taxpayers (including spouse, if married) who owned a principal residence at any time during the three years prior to the date of purchase are not eligible for the credit. This means that you can qualify for the credit if you (and your spouse, if married) have not owned a home in the three years prior to a purchase. If you make an eligible purchase in 2008, you claim the first-time homebuyer credit on your 2008 tax return. For an eligible purchase in 2009, you can choose to claim the credit on either your 2008 or 2009 income tax return. Q. Can I apply for the credit if I bought a vacation home or rental property? A. No. Vacation homes and rental property do not qualify for this credit. Q. Who is considered to be a first-time homebuyer? A. Taxpayers who have not owned another principal residence at any time during the three years prior to the date of purchase. Q. When do I have to buy a new home to get the credit? A. The home must be purchased after April 8, 2008, and before Dec. 1, 2009, in order to obtain the credit. For a home you construct, the purchase date is considered to be the date you first occupy the home. Q. How do I apply for the credit? A. The credit is claimed on new IRS Form 5405, First-Time Homebuyer Credit, and filed with your 2008 or 2009 federal income tax return. Q. Are there income limits? A. Yes. The credit is reduced or eliminated for higher-income taxpayers. The credit is phased out based on your modified adjusted gross income (MAGI). For a married couple filing a joint return, the phase-out range is $150,000 to $170,000. For other taxpayers, the phase-out range is $75,000 to $95,000. This means that the full credit is available for married couples filing a joint return whose MAGI is $150,000 or less and for other taxpayers whose MAGI is $75,000 or less. Read More.....